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The basic economic problem arises mainly because:
a) People are lazy b) Wants are unlimited while resources are limited c) Governments print too much money d) All goods are scarce
Answer: b) Wants are unlimited while resources are limited -
The opportunity cost of holding money instead of bonds is:
a) Interest forgone b) Inflation rate c) Tax payment d) Depreciation
Answer: a) Interest forgone -
A fall in the price of tea causing consumers to buy less coffee indicates that tea and coffee are:
a) Complementary goods b) Inferior goods c) Substitute goods d) Public goods
Answer: c) Substitute goods -
Which of the following is a fixed cost?
a) Wages of casual workers b) Cost of raw materials c) Rent of factory building d) Electricity used in production
Answer: c) Rent of factory building -
The central bank uses open market operations mainly to:
a) Regulate labour supply b) Control money supply c) Determine tax rates d) Regulate foreign trade
Answer: b) Control money supply -
Which of the following is an example of indirect tax?
a) Company income tax b) Personal income tax c) Value added tax d) Capital gains tax
Answer: c) Value added tax -
The average propensity to consume is:
a) Consumption divided by income b) Income divided by consumption c) Saving divided by income d) Investment divided by income
Answer: a) Consumption divided by income -
If total utility is maximum, marginal utility is:
a) Positive b) Negative c) Zero d) Rising
Answer: c) Zero -
Which of the following best describes inflation?
a) Continuous rise in the general price level b) Fall in national income c) Increase in unemployment d) Increase in imports
Answer: a) Continuous rise in the general price level -
A perfectly elastic demand curve is:
a) Vertical b) Downward sloping c) Horizontal d) Upward sloping
Answer: c) Horizontal -
The reward for entrepreneurship is:
a) Rent b) Wages c) Interest d) Profit
Answer: d) Profit -
Which of the following causes a movement along the demand curve?
a) Change in consumer income b) Change in price of the commodity c) Change in taste d) Change in population
Answer: b) Change in price of the commodity -
In economics, capital refers to:
a) Money only b) Natural resources c) Man-made productive assets d) Entrepreneur’s income
Answer: c) Man-made productive assets -
The money paid regularly to a retired worker is called:
a) Subsidy b) Pension c) Transfer earnings d) Dividend
Answer: b) Pension -
Which of the following is a feature of monopolistic competition?
a) Homogeneous products b) No competition c) Product differentiation d) Single seller
Answer: c) Product differentiation -
If marginal product is above average product, average product will:
a) Rise b) Fall c) Remain constant d) Become zero
Answer: a) Rise -
Devaluation differs from depreciation because devaluation:
a) Occurs automatically in free markets b) Is an official reduction in currency value c) Increases exports only d) Reduces inflation permanently
Answer: b) Is an official reduction in currency value -
Which of the following is a stock variable?
a) National income b) Investment c) Capital d) Savings per year
Answer: c) Capital -
The demand for labour is called derived demand because it depends on:
a) Government policy b) Population growth c) Demand for final goods and services d) Labour unions
Answer: c) Demand for final goods and services -
Which of the following is a merit good?
a) Cigarettes b) Alcohol c) Education d) Gambling
Answer: c) Education -
The main objective of production is to:
a) Increase scarcity b) Satisfy human wants c) Reduce population d) Increase imports
Answer: b) Satisfy human wants -
When supply exceeds demand, there will be:
a) Shortage b) Equilibrium c) Surplus d) Inflation
Answer: c) Surplus -
The slope of a budget line depends on:
a) Consumer taste b) Prices of goods c) Government expenditure d) Level of imports
Answer: b) Prices of goods -
Which of the following is a function of commercial banks?
a) Printing currency b) Issuing coins c) Accepting deposits d) Formulating fiscal policy
Answer: c) Accepting deposits -
The total amount spent by consumers on goods and services is called:
a) Investment expenditure b) Consumption expenditure c) Transfer payment d) Government revenue
Answer: b) Consumption expenditure -
A rise in demand while supply remains constant will lead to:
a) Lower price and lower quantity b) Higher price and higher quantity c) Lower price and higher quantity d) Higher price and lower quantity
Answer: b) Higher price and higher quantity -
Which of the following is a barrier to entry in monopoly?
a) Homogeneous products b) Freedom of entry c) Patent rights d) Perfect information
Answer: c) Patent rights -
The sum of marginal utilities divided by price is equal across goods at consumer equilibrium according to:
a) Gossen’s second law b) Law of supply c) Quantity theory of money d) Say’s law
Answer: a) Gossen’s second law -
The process by which banks create credit is known as:
a) Rationing b) Monetization c) Credit creation d) Capitalization
Answer: c) Credit creation -
Which of the following is most likely during a recession?
a) Rising employment b) Falling unemployment c) Declining output d) Rising exports only
Answer: c) Declining output -
A subsidy granted to producers will generally:
a) Reduce supply b) Increase production costs c) Increase supply d) Decrease demand
Answer: c) Increase supply -
The equilibrium price in a market is determined by:
a) Government decree only b) Interaction of demand and supply c) Producer decision only d) Consumer preference alone
Answer: b) Interaction of demand and supply -
Which of the following is not a function of the entrepreneur?
a) Bearing risk b) Coordinating production c) Providing land d) Decision making
Answer: c) Providing land -
The formula for price elasticity of demand is:
a) Percentage change in quantity demanded divided by percentage change in price b) Percentage change in price divided by percentage change in quantity demanded c) Quantity demanded divided by total price d) Total expenditure divided by quantity demanded
Answer: a) Percentage change in quantity demanded divided by percentage change in price -
Which of the following is an example of variable cost?
a) Insurance premium b) Machine depreciation c) Wages of temporary workers d) Factory rent
Answer: c) Wages of temporary workers -
Fiscal policy is mainly concerned with:
a) Money supply and interest rates b) Taxation and government expenditure c) Exchange rate determination d) Population growth
Answer: b) Taxation and government expenditure -
A decrease in supply with demand unchanged will result in:
a) Lower equilibrium price b) Higher equilibrium price c) Lower consumer income d) Stable equilibrium quantity only
Answer: b) Higher equilibrium price -
Which of the following is a qualitative measure of economic development?
a) GDP growth rate b) Per capita income c) Literacy rate d) Export volume
Answer: c) Literacy rate -
The law of supply states that:
a) Quantity supplied falls as price rises b) Quantity supplied rises as price rises c) Supply remains constant d) Demand equals supply always
Answer: b) Quantity supplied rises as price rises -
A customs duty imposed on imports is called:
a) Subsidy b) Tariff c) Quota d) Excise duty
Answer: b) Tariff -
Which of the following is not included in GDP?
a) Production of final goods b) Salaries and wages c) Second-hand car sales d) Investment expenditure
Answer: c) Second-hand car sales -
The shape of a typical average variable cost curve is:
a) Vertical b) Horizontal c) U-shaped d) Upward sloping straight line
Answer: c) U-shaped -
Which of the following is an example of capital intensive production?
a) Using many workers and few machines b) Using advanced machinery and fewer workers c) Relying only on manual labour d) Household production
Answer: b) Using advanced machinery and fewer workers -
Balance of trade refers to:
a) Total payments and receipts from abroad b) Difference between exports and imports of visible goods c) Exchange rate policy d) Money supply regulation
Answer: b) Difference between exports and imports of visible goods -
Which of the following is most likely to reduce inflation?
a) Increasing money supply b) Reducing taxes c) Increasing interest rates d) Increasing government expenditure
Answer: c) Increasing interest rates -
Consumer sovereignty means:
a) Producers determine what to produce b) Consumers influence production through their demand c) Government controls production decisions d) Foreign firms dominate markets
Answer: b) Consumers influence production through their demand -
The minimum legal wage set by government is known as:
a) Transfer payment b) Living allowance c) Minimum wage d) Salary scale
Answer: c) Minimum wage -
Which of the following is not a feature of money?
a) Portability b) Divisibility c) Perishability d) Durability
Answer: c) Perishability -
The quantity theory of money suggests that inflation occurs when:
a) Money supply grows faster than output b) Output grows faster than money supply c) Unemployment increases d) Exports decline
Answer: a) Money supply grows faster than output -
A production possibility curve is usually concave to the origin because of:
a) Increasing opportunity cost b) Constant returns to scale c) Unlimited resources d) Falling prices
Answer: a) Increasing opportunity cost
2019 IJMB economics paper 3
